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Janet Yellen Big User Of Vanguard Funds

By

Cinthia Murphy

October 09, 2013

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First woman nominated to head the Fed is a fan of indexing.

Janet Yellen, the central banker who is expected to replace Ben Bernanke as Federal Reserve chairman, is an index investor with a soft spot for Vanguard. Prresident Barack Obama formally nominated her Wednesday afternoon.

In a financial disclosure report she filed back in 2011, which was first picked up by the Wall Street Journal, Yellen disclosed anywhere from $3 million to as much as $9.15 million in assets linked to Vanguard mutual funds, including an allocation to the firm’s first-ever fund, the Vanguard Index Trust 500 Portfolio. Yellen also owns some Fidelity funds and other securities.

The form, which lists valuation of assets in ranges rather than exact amounts, put Yellen’s total invested assets at up to roughly $13.2 million in 2011—a level that would likely make her the wealthiest Federal Reserve official.

She has been serving as vice chair of the Fed since October 2010, and served before that as the president of the San Francisco Federal Reserve Bank. Yellen has been a supporter of current Fed Chairman Ben Bernanke’s ultra-loose monetary policies since the financial crisis. She would be the first woman to head the Fed.

Yellen’s assets have likely grown since 2011 as the U.S. stock market rallied to new record highs between then and now amid a tepid U.S. economic recovery fueled in part by the Fed’s easy-money policies. The S&P 500 has tagged on nearly 300 points, or about 22 percent, since Yellen’s 2011 disclosure.

What’s more, Yellen’s investments also reflect some early-on repositioning of fixed-income exposures when in late 2010, she started shifting out of longer-dated muni and high-yield corporate funds and into short-term debt, according to the filing.

In recent years, demand for short-dated fixed-income funds has been on the rise as investors brace for higher interest rates, which are particularly detrimental to prices of longer-dated debt. As of 2011, up to $1 million of her assets were invested in the Vanguard Short Term Bond Index Fund.

Fans Of Indexing

Yellen is the second high-visibility official to emerge in the Obama administration this year who seems to embrace indexing, the first being U.S. Treasury Secretary Jack Lew, who took office in January.

Lew, the White House chief of staff whom President Obama had replace Tim Geithner earlier this year, disclosed that many of his investments were tied to index strategies; in particular, low-cost ETFs.

President Obama is expected to nominate Yellen for Federal Reserve Chairman at around 3 p.m. ET today.